Start-up businesses – what about payroll and pensions?
Setting up your own business is a hugely exciting prospect. It gives you the opportunity to do something that you really love, you can share your knowledge and experience with others, and of course you can be your own boss!
Having a business plan is important, and part of this plan might be that you’ll be taking on employees, either immediately or at some point in the future. So in terms of payroll and pensions, what do you need to think about when you take on your first employee?
First of all, you’ll need to set up a PAYE scheme with HMRC so that you can calculate and pay your employee’s wages and report the pay, tax and national insurance due for each employee to HMRC. You can set up your PAYE scheme online on the .GOV.UK website.
Then you’ll need to appoint a payroll administrator, or you’ll need to buy some payroll software and learn how to use it – get up to speed with the law around minimum pay requirements, tax calculations and statutory pay. To keep your costs down I would recommend that you run monthly payrolls rather than weekly.
There’s an additional cost to the employer over and above the employee’s salary which you might not be aware of, and that’s the employer’s national insurance (NI) contributions, which are 13.8% of an employee’s pay over and above the current NI threshold of just over £8,000.
You’ll need to tell HMRC about the tax and national insurance due to HMRC each pay period by sending a Full Payment Submission on or before pay day, and then paying the amount due to HMRC by the 19th of the following month.
Turning to your pension responsibilities, if you’re paying your employee more than auto-enrolment trigger of £10,000 a year, then you’ll need to set up a workplace pension for them. If you started paying your staff between 1st October 2016 and 30th June 2017 then your deadline for setting up a pension scheme will be 1st January 2018, or if you starting paying staff between 1st July and 30th September 2018 then your staging date will be 1st February 2018. It’s important to note that after 30th September 2017, the ‘phasing in’ of staging dates has finished, and if you start paying staff from September 2017 onwards, then you’ll need to set up a scheme straight away, within 6 weeks of paying your first employee, which is an extremely tight deadline.
It’s a good idea to get advice when you’re setting up your business so that you know exactly what you need to do by law. We can set up your PAYE scheme for you and run your payroll, and if you need a pension scheme then we can also help you with this when the time comes.